Of course, the American economic dominance won’t be shrinking overnight. Just another example of why sanctions are counterproductive. Indeed, it will give rise to alternative systems developed by China & Russia. Weaponizing the SWIFT international payments system might cut Russia off, but risks eroding the dollar-dominated global financial system. In a tweet on Sunday, February 27, Hanke wrote: John Hopkins economist Steve Hanke writes that putting sanctions on Russia could prove to be counterproductive to the West. Why Sanctions Could Be Counterproductive? The blockchain-based settlements done using Digital Yuan can challenge the traditional payment systems. The analyst writes that China can easily persuade countries like Russia to use the e-CNY after being banned from SWIFT and CHIPS.
As per China’s central bank PBoC, the token is “technically ready” for cross-border use. The Bloomberg analyst writes that with the Digital Yuan which is the e-CNY, China can redefine its position in the global financial market. But while CHIPs holds a 40% global market share, CIPS processes only 3% of global transactions. Just as America’s CHIPS settles international payments in the USD, China’s CIPS can settle claims in the Yuan while running over its own messaging network. China is building its own Cross Border Interbank Payments System (CIPS). Thus, weaponizing them against Russia will further convince China of building an alternative to escape American dominance.Īs per reports, China has already started working to build an effective alternative to CHIPS – the Clearing House Interbank Payments System.
economic stronghold are the SWIFT, CHIPS, and Dollar. However, this could give rise to central bank digital currencies (CBDCs), especially the one developed by U.S’s economic rival China aka the Digital Yuan.īloomberg analyst Andy Mukherjee writes that the key pillars of the U.S. The view was echoed by Guosheng Securities, who recommended Chinese payment-related stocks, citing the potential of China's own payment system, CIPS, and digital yuan, to break the dollar's hegemony.Īgainst the backdrop of global power competition, the digital yuan "will pay a key role in promoting the yuan's global status, and its development will accelerate," analysts Liu Gaochang and Yang Ran wrote.Following Russia’s attack on Ukraine last week, the NATO allies have decided to impose sanctions cutting down Russia from the global SWIFT financial ecosystem. "Although it's hard to replace SWIFT in the short term, this incident is very beneficial to yuan's globalisation over the long run."
The SWIFT sanctions against Russia "is a milestone event that will accelerate the process of de-dollarisation," wrote Dang Congyu, analyst at Founder Securities. Investors speculating on the impact of the news pushed shares of leading Chinese companies involved in developing digital yuan payment infrastructure higher, including Newland Digital Technology Co (000997.SZ), Lakala Payment Co (300773.SZ) and Client Service International Inc (300663.SZ), despite weakness in the broader market.Ī sub-index tracking the internet finance sector (.CSI399805) jumped more than 2% early in the trading day before trimming gains. Ratcheting up sanctions following Russia's invasion of Ukraine, the United States and Europe said on Saturday they would banish big Russian banks from SWIFT and announced other measures to limit Moscow's use of a $630 billion war chest. It was GF's second such risk statement since Friday, after investors betting on a jump in oil prices jolted the fund's share price higher in secondary markets.Ĭhinese payment-related stocks jumped as investors wagered that the United States and Europe kicking Russia out of the SWIFT global payment system would benefit China's own cross-border payment system and accelerate the development of the country's digital currency, the e-CNY. "Investors who blindly invest in funds at a high premium to net asset value may suffer large losses," the statement said, adding that the fund was operating normally. The introduction of CIPS by Russian banks should make transactions between Russia and China very easy, while also encouraging other countries to adopt the system. Select Oil Exploration and Production Index was "significantly higher" than net asset value. The introduction of the CIPS, which is already considered a Chinese SWIFT, is an indication that Russia has abandoned a dollar-denominated financial transaction. In a statement on Monday, GF Fund Management said that the price of its fund for qualified domestic institutional investors tracking the Dow Jones U.S. SHANGHAI, Feb 28 (Reuters) - Shares in energy firms and payment service companies rose sharply on Chinese markets on Monday as investors bet on stocks they saw potentially benefiting from the conflict in Ukraine, while a major fund house repeated a warning against speculation.
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